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Two-period pricing and quick response with strategic customers

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  • Dong, Junfeng
  • Wu, Desheng Dash

Abstract

This research examines the impact of the strategic customer behavior in two-period pricing and the inventory decisions in a quick response system. A model with a differentiated value period of product is developed when customers are strategic and heterogeneous. Interestingly, the unique equilibrium is proven to exist if and only if the degree of customer strategic behavior is sufficiently high. Otherwise, the dynamic pricing strategy in one selling season is not a suitable choice for a firm. Moreover, the impact of strategic consumers on pricing and inventory strategies is investigated in the case where the clientele's taste for product value follows a uniform distribution. Surprisingly, contrary to previous studies, we found that strategic consumers may yield more revenues in specific scenarios. An extended analysis on Beta distribution is also presented, showing that there is greater chance to obtain the highest profit in the supply chain when all customers are strategic and if more people prefer low-value products.

Suggested Citation

  • Dong, Junfeng & Wu, Desheng Dash, 2019. "Two-period pricing and quick response with strategic customers," International Journal of Production Economics, Elsevier, vol. 215(C), pages 165-173.
    • Handle: RePEc:eee:proeco:v:215:y:2019:i:c:p:165-173
    DOI: 10.1016/j.ijpe.2017.06.007
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